Sunday, June 17, 2007

Beware the trap!

Questioning the new tax property laws.

Letting my thoughts settle down after the initial confusion, I come out with a disturbing conclusion.

1) Isn't this whole thing a first step to killing the "save-our-homes" amendment?

The fact is (if the January 2008 proposals are voted) that a homeowner will be dropping his "save our homes" rights if he takes advantage of the new "super-sized" homestead exemption.

Historically "save our homes" is the only amendment that protected the homeowner against local governments abuses in a consistent way. Are you going to believe that, from now on, cities and counties will start to behave and give you, the citizen, their upmost considerations ahead of their deep rooted bureaucracies, and free wheel spending?

2) In fact, after a few years of savings, the inevitable will occur. The initial savings will be wiped out by inexorable real estate valuation. Had you opted to accept the super-sized homestead exemption, you will pay for it later, take my word for it.

2) Wouldn't it have been fair to allow a homeowner to accept the new homestead super-sized protection and keep his "save our homes" privileges which allows the governments to raise their tax bill only 3% per year? Why eliminate this protection for the beleaguered first-time home-buyer struggling to afford a home?

3) That leads me to believe that the poison pill given to us has a hidden purpose:
slowly kill the "save-our-homes" provisions as present beneficiaries die, sell, or move out of their homes.

4) What about constitutionally prohibiting any property assessment to raise above the national inflation average? Isn't the inflation index a perfect gauge of keeping taxes and spending within a reasonable level?

5) As a matter of fact, I first thought that the new provisions were pathetic. Now I am starting to believe that they are mischievous.

I welcome your thoughts.
The only way to know if I am wrong is hearing it from you.

Henry B. Nathan
is a Florida Realtor
Please visit my website

Saturday, June 16, 2007

Is this all?

Property tax relief by Florida Legislature falls short.

What did they vote?

1) Roll back property taxes to their 2006 level, and then cut an additional 0,3,5,7, or 9 % depending on how the specific cities raised their taxes the past 5 years - Local governments can override these rollbacks by two-third votes or a referendum.

2) A constitutional amendment will be submitted to voters on January 29th, 2008 to modify the homestead exemption. If approved, this exemption would be raised to 75% of the first $200,000 of home value and 15% of the next $300,000. It will be a minimum of $ 50,000 or $ 100,000 for low income seniors.

3) Beneficiaries of Save our Homes rule, have a one-time option to accept the new homestead exemption or keep their present benefits and limit their homestead exemption to their $ 25,000 level.

4) In the future, taxes cannot increase more than an indicator of personal income and allowances for new construction. How will that be calculated, is something that we ignore.

The comments:

Legislators are saying that the average homesteaded owner will get a $ 174 drop in his taxes for 2007 and a $ 1,132 in 2008 if the new homestead constitutional amendment passes.
The average non-homesteaded owner, will get an average $ 245 a year drop by 2008.
The average commercial property tax bill will be reduced by $ 1,240 in 2008.

Most Realtors are not impressed at all. This is not going to have any significant effect on the sagging real estate market. The issue will have to be addressed again down the road, said Richard Barkett, chief executive of the Realtor Association of Greater Fort Lauderdale.

What issues were not addressed.

- Snowbirds, investors, commercial property owners, will hardly notice any change in their tax bills. They are an important factor in Florida Real Estate, and they a good part of its downturn.
But they have been mostly ignored.
The owners of vacation homes, who have seen their taxes and insurance bills triple in a short time, are the big losers.

- The rollbacks, even if they reach their maximum of 9% will not solve the problems of property owners who have seen their assessments triple or quadruple during the last few years.
These reductions, compared to the tripling of tax bills during the last 5 years will hardly make a dent in the bills.

- The issue of the "portability" of the save-our-homes tax savings has not been addressed. A big disappointment for thousands who are trapped in their present homes, unable to purchase smaller or larger homes because their taxes would triple or even quadruple. Many potential buyers are very disappointed.

- The so-called relief of insurance premiums was just a hot balloon. They are still a huge factor in maintenance expenses of residences and commercial properties alike.

- If passed, the homestead exemption raise will be the only significant gain for low-income and first-time home buyers. A typical entry-level $200,000 home might pay a yearly average of $900 in property tax instead of the present $ 3,150: a saving of $2,250 or about $190 per month. That's good news for the affordable housing segment.

- A $ 500,000 homesteaded home would be taxed an average of $ 5,490 instead of $8,550 - a saving of $ 3,060 per year or about $ 250 per month. To pay the mortgage, insurance and maintenance of a $500,000 home, a combined household income of more than $ 150,000 per year is necessary, as per FNMA guidelines. That is at least $ 12,500 gross income per month.
A $ 250 break is a welcome relief, but will not be the deal maker.

- In essence, the real issue of local governments skimming their constituents during the real estate boom has largely been ignored. Rolling back a maximum 9% will not recoup the 300% tax increases that have beaten up our home buyers and non-homestead owners.
Real estate is a very large part of Florida's economy. It could not remain ignored. Something has been done, it is true. I would say that it's mostly a kind gesture to voters, not a solution.

- This is not going to be the shot in the arm that our real estate market was expecting. However, it will provide a minimal relief, and,hopefully, just a first step in the good direction.

- The proliferation of cities and municipalities in South Florida is an issue that must be addressed. Hundreds of commissioners, city managers, city compliance officers, city water managements, unnecessary bureaucracies, police departments, fire departments, almost encroaching on each other, are weighing on the taxpayer. This is not the most sensible approach to government economy. It is not bordering the ridiculous: it is laughable.

Trying to control this insanity has caused the panic of these local governments and their heavy lobbying on state legislature to prevent major changes. Will they be held accountable?
Judging by the pitiful low percentage of voters on city elections, it won't happen any time soon.

Henry B. Nathan June 16, 2007

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